A federal judge in Wisconsin has ruled that providing clergy with a tax-free housing allowance is unconstitutional. U.S. District Judge Barbara Crabb’s decision could affect pastors across the country if the ruling is upheld by higher courts.
At the center of the controversy is a law passed by Congress in 1954 permitting clergy to designate part of their salary as “housing allowance.” This portion of their income, used to pay for rent, a mortgage, property taxes, and other expenses related to housing, is not subject to federal income taxes (although it is subject to social security taxes).
Why is a 60-year-old law being overturned as unconstitutional? The suit was filed by the Freedom From Religion Foundation which argued the tax break is given to clergy on the basis of religion, which they argue is a violation of the First Amendment.
Whether or not pastors will keep their housing allowances will be determined when higher courts review the ruling from Wisconsin. With declining church attendance, rising numbers of “religiously unaffiliated” Americans, and federal and state governments facing enormous debts, there is a growing concern that the tax benefit for pastors may end soon.
According to the 2012-2013 Compensation Handbook for Church Staff, Christianity Today’s bi-annual survey of compensation levels based on 4,600 participating churches, the average salary and benefits for a senior pastors is $82,938. This figure, however, does not account for the many pastors in non-senior roles who earn far less but still benefit from the housing allowance. In other words, pastors are not paid like Wall Street CEOs or live lavishly among the 1%.
The perception created by the lawyer for the Freedom From Religion Foundation, however, was one of luxury and abuse. She argued that the clergy housing allowance cost the federal government $2.3 billion in taxes between 2002-2007, and that the benefit is misused. “When you’re dealing with some of these mega-church pastors with huge mansions,” she said, “they can be paid an enormous amount in housing allowances.”
The notion of pastors being paid millions of dollars tax-free to live like celebrities may not prove or disprove the constitutionality of the housing allowance law, but it could be a powerful argument in the court of public opinion. The recent reports about Steven Furtick’s 16,000 square foot house and the lack of financial transparency at Elevation Church certainly don’t help the thousands of over-worked, under-paid pastors around the country who depend on a housing allowance.
Of course Furtick is not the only pastor to get negative media attention for his compensation or lifestyle. The regular flow of stories about private jets, huge homes, and extravagant purchases by a handful of pastors may be enough to turn sentiment against the housing allowance.
